Understanding the Basics of M&A – Are two better than one?

What is M&A?

Generally, mergers and acquisitions (“M&A”) refer to corporate exercises/transactions/strategy where:

· Companies combine to form a new entity (called “merger”). This is less common in Malaysia as compared to acquisition.

· One company/individual buys/acquires another company (called “acquisition”). The most common acquisition in Malaysia is an acquisition of shares in a target company as compared to an acquisition of a business or assets from a target company.

M&A can be categorised into “public M&A” or “private M&A” depending on whether the target company is publicly listed on stock exchange, i.e. Bursa Malaysia or a privately held one.

Why M&A?

Simply put: Two are better than one - hopefully they can do better than each of them exists separately/independently, including, without limitation, cost savings, revenue growth, market entry and market expansion/diversification.

Examples of completed M&A deals in Malaysia:

·  Example of merger in Malaysia: Merger of Celcom Axiata Berhad and Digi.Com Berhad’s mobile telecommunication network operations with the merged company named as “CelcomDigi Bhd”[1] with the aim that, amongst others, both are commercially stronger and more resilient by pooling together financial strengths, resources, capabilities and experiences[2].

·  Example of acquisition of shares in Malaysia: Acquisition of 65% shares of Inside Scoop Sdn Bhd by Farm Fresh Berhad with the aim that, amongst others, for Farm Fresh Berhad to diversify/enter into the artisanal ice cream chain business to mitigate concentration risk on Farm Fresh Berhad’s core business of rearing dairy cows and the production and marketing and sale of dairy milk products[3].

Key considerations of M&A:

M&A requires careful considerations such as the objectives/goals parties try to achieve via M&A, valuation, funding, and the engagement of qualified advisors such as financial, tax and legal advisors to advise and assist with the areas under their respective qualifications and expertise, i.e. financial health of the target company, structuring, compliance of applicable laws and regulations including, without limitation, company and industry/business-specific laws and regulations, foreign equity restrictions/local/Bumiputra requirements (if applicable) and regulatory/financial institution/counterparties’ approval/notification considerations (if applicable) respectively.

Conclusion:

“Two are better than one” can be true for M&A deals if done with detailed preparation and diligence taking into account of the above.

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This article dated 14 February 2025 is contributed by Maple Chieng (Corporate Commercial Lawyer) from Maple Chieng & Co. for general information only and is not a substitute for legal advice.  

Maple Chieng & Co is experienced in providing comprehensive services and support in M&A transactions across a variety of industries such as manufacturing, healthcare, technology, and food and beverage. Please refer our website at https://www.maplechiengco.com/ for further information.

If you have any specific queries or require advice/assistance, please contact us at maple@maplechiengco.com 

[1] https://www.komunikasi.gov.my/en/public/news/20860-celcom-axiata-digi-com-merger-mcmc-formally-receives-digi-telecommunications-application

[2] https://celcomdigi.listedcompany.com/newsroom/Digi_-_Announcement_(21_June_2021).pdf

[3] https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=223983&name=EA_DS_ATTACHMENTS